But at a current $54.70 per ton, iron ore is on course to close the first three months of 2016 with price gains of around 27 percent.

Compare and contrast with copper, another industrial commodity plagued by the same demons of slowing demand growth and oversupply, which is currently showing year-to-date gains of just six percent.

Fundamental signals from the iron ore market look reasonably good, or at least a lot less dire than at the end of last year, when the price bombed to $37.00.

China, the iron ore market’s demand driver, lifted import volumes by 6.4 percent in the first two months of the year.

The country’s steel mills appear to be ramping up production ahead of the spring construction season. They are doing so at least in part because of higher steel prices, which seem to be attesting to better end-use demand.

All the evidence appears to suggest that the worst of the bear storm may be over for the iron ore market.

But is it?

BEYOND SEASONALITY

In many ways iron ore is behaving just as it usually does at this time of year.

Supply often drops in the first part of any year, reflecting adverse weather conditions in both the world’s major suppliers, Australia and Brazil.

Overriding that normal seasonality is the impact of the Samarco dam disaster in Brazil last November. That has taken around 30 million tonnes of supply out of the market and a restart, even at reduced capacity, is not going to happen until the fourth quarter of this year.

As iron ore demand also tends to get a fillip around this time of year as Chinese steel mills restock.

This year’s acceleration in steel activity is coming from a lower base. The country’s production fell by 2.3 percent last year and by a harder 5.7 percent in the first two months of 2016.

But, as with supply, there is more going on here than just the “normal” seasonality of construction activity.

Just about every key metric of China’s construction sector has improved sharply this year.

Property sales? They are up 43.6 percent in January and February, compared with last year’s 14.4 percent.

Property under construction? That’s up 5.9 percent, compared with 1.3 percent last year.

And, most importantly for steel demand, newly started floor space increased by 13.7 percent in January and February, compared with a 14.0 percent slump in 2015.

You can start to see why China’s steel mills are snapping up iron ore again in anticipation of stronger demand for their products.

MORE STIMULUS PLEASE?

The problem with this burst of activity is its source.

Chinese policy-makers appear to be reverting to past practice in the face of last year’s sharp braking of economic growth.

The property market is being stimulated by renewed incentives in the form of lower deposit requirements and by a broader dose of central bank largesse.

The People’s Bank of China (PBOC) cut its reserve requirement ratio, or the amount of cash that banks must hold as reserves, by 50 basis points at the end of February. It was the fifth such reduction in the space of a year.

Total social financing, a broader measure of money flow from the financial sector to the real economy, spurted 13.3 percent higher in the first two months of 2016 after falling in both 2014 and 2015.

Unsurprisingly, this flood of money has stopped the decline in fixed asset investment, which has leveled off at 10.2 percent so far this year.

Bear in mind that this all runs counter to Beijing’s rhetoric of re-engineering China’s growth model away from the industrial drivers of the past in favor of services.

It is, rather, an echo of the massive stimulus unleashed back in 2009 when Chinese policy-makers took fright at the global manufacturing slump that followed the global financial crisis.

Old habits, it seems, die hard.

SHORT-TERM GAIN…

And as with the 2009 fixed asset investment splurge, this latest binge will bring short-term gain, not least to beleaguered sectors such as steel and construction.

But the real danger is that it will do so at the cost of long-term pain.

Renewed signs of life in China’s property market are confined to the biggest cities. While they bloom again, smaller cities with their ghost towns of unsold property still wither.

The country’s steel industry is struggling because of structural over-capacity and massive levels of debt, some of it hidden in opaque local government financial vehicles.

A sharp reminder of those underlying problems has just come in the form of Dongbei Special Steel, a state-owned entity that has defaulted on a short-term loan just after the apparent suicide of its chairman.

Beijing is committed to restructuring its steel sector and there is much talk about creating social funds to ease what will be a massively painful process.

But that work is for tomorrow.

Today, increased government lending is stimulating restarts of mothballed capacity, which is only going to make those structural problems worse not better.

The plates of rust-belt economics are being kept spinning but at what longer-term price?

SENTIMENT RULES OK?

Iron ore, a commodity whose fortunes are inextricably linked to China, is benefiting from Beijing’s reversion to historical stimulus form.

But while structural problems remain, both in China’s steel sector and in parts of its property sector, there is always going to be the danger of a sharp reversal of fortunes.

A new ingredient in the iron ore market is the amount of speculative activity now taking place in China’s futures markets.

That sharp jump in iron ore prices at the start of March was led by the Dalian Exchange not the physical market. And it was predicated on a similar bullish surge in Shanghai steel futures. nL5N16G2HJ

The Chinese “street” was betting on exactly the sort of stimulus impact showing up in those property and fixed asset investment figures.

But the madness of crowds works both ways.

If the investment herd takes fright, for example at more defaults in the steel sector, the hit on iron ore pricing could be just as brutal on the downside as it was on the upside.

One bear storm may have passed. But that doesn’t mean that another one isn’t brewing.